SNC-Lavalin Group Inc. fell the most in more than three years after reporting second-quarter profit that missed analysts’ estimates, dragged down by losses in the engineering and construction unit.
Net income of 17 cents a share lagged the 37-cent average of analyst estimates compiled by Bloomberg. Revenue rose 33 percent to C$2.25 billion, the Montreal-based company said Thursday in a statement.
“Challenging soil conditions” relating to the tunnel portion of a mass transit project, coupled with additional expenses on a highway project -- both in Canada -- led to cost overruns, the company said. As a result, the pretax loss in SNC’s infrastructure and construction unit widened to C$43.2 million from C$9.2 million a year earlier, the company said in a filing on its website.
SNC, Canada’s largest engineering company, tumbled 8.4 percent to C$40.05 at the close of trading in Toronto -- the stock’s biggest single-day drop since February 2012. That took the shares’ decline this year to 9.6 percent, compared with a 1.6 percent drop for Canada’s benchmark Standard & Poor’s/TSX Composite Index.
“Disappointments are centered around the infrastructure division, which should become more controllable in the second half of 2015 and in 2016,” Maxim Sytchev, an analyst at Dundee Securities in Toronto, said today in a note to clients. He recommends investors buy SNC shares.
Chief Executive Officer Robert Card is pressing ahead with plans to eliminate about 9 percent of SNC-Lavalin’s workforce by 2016 while integrating last year’s C$2.1 billion acquisition of Kentz Corp. Results in the period include C$7.7 million in restructuring costs, mostly severance payments, compared with less than C$1 million a year earlier.
The company also confirmed its full-year forecast for engineering and construction unit earnings per share of $1.30 to $1.60 this year.
Net income from infrastructure concession investments fell to C$45 million from C$78.9 million following the sale last year of AltaLink Holdings LP, SNC said. On that basis, the loss in engineering and construction narrowed to C$18.5 million from C$46.9 million.